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Wednesday, July 29, 2015
by Kevin Coupe
Variety reports that next February 7, when the New York Jets take the field to play in the Super Bowl, I won't need a television to watch the game and the high-profile, high-cost commercials interspersed with the action.
Okay. That's not actually what Variety wrote. (What can I say. I have a rich fantasy life.) Actually, the story went like this:
"For nearly half a century, the only way for the average consumer to see all the glitzy commercials that accompanied the Super Bowl was to watch a broadcast of the game on television. In 2016 CBS intends to shake things up by live-streaming — in as close to real-time as possible — every single national ad that supports its February 7, 2016, telecast of Super Bowl 50. The maneuver is one that could have seismic ramifications for the media business, as it essentially forces the event’s big-spending sponsors to consider online impressions and TV ratings at the same time, not separately, as has been common practice."
The story notes that the move reflects "a significant industry admission" - finally - that the way people consume content has changed ... and that even live sporting events, usually seen as the last bastion of old media dominance, are being disrupted as well. The CBS decision essentially tells advertisers that if they are going to get maximum bang for their buck, they cannot just rely on traditional media constructs.
This is indeed a big change. As Variety writes, "Some Super Bowl ads have been available on live-streams of the game in the past. But the TV broadcast and the stream are typically not sold together in such a bold fashion. Advertisers never had to buy both. In recent years, viewers of a live-stream of the Super Bowl would often see a handful of the same ads being broadcast on TV, but not the majority of them. In some cases, fans might see the same ad multiple times. In NBC’s live-stream of Super Bowl XLIX this year, for example, just 18 of more than 70 Super Bowl advertisers chose to put their commercials online."
But now, the story makes clear, another tradition has bitten the dust.
And the Eye-Opening lesson here is that anyone who is in the business of catering to consumers ... providing them with product as well as content ... needs to be adjusting their strategies and tactics to account for these changes.
Reuters reports that Supervalu is exploring the possibility of a spinoff and IPO for its Save-A-Lot discount grocery chain "as the retailer looks to insulate the fast-growing unit from its slower-growing grocery wholesale and food retail businesses."
The timing for such a move has not yet been decided, the company said.
The Wall Street Journal writes that low-price, no-frills chains such as Save-A-Lot "have attracted cost-conscious customers, while specialty chains led by Whole Foods Market Inc. have lured wealthier shoppers - leaving many traditional grocers in an unappealing middle ground and forcing a stream of acquisitions, store closures and bankruptcies. Supervalu long dismissed the idea of letting go of Save-A-Lot, which it had acquired in 1993, because the 1,300-store chain was the fastest-growing and most-promising of Supervalu’s empire.
"But Supervalu Chief Executive Sam Duncan said on Tuesday that splitting it off could enable Supervalu to focus on its other 200 grocery stores, like Farm Fresh and Cub Foods, and its wholesale business, which is one of the largest in the country. He said such a move could help Save-A-Lot become more competitive."
MarketWatch quotes Duncan as saying that "today’s announcement reflects our commitment to continuing to explore ways to maximize value for our shareholders. We believe a separation of our Save-A-Lot business could allow Save-A-Lot, our Independent Business and our Retail Food banners to better focus on their respective operations, and pursue strategies specific to their business characteristics and growth potentials, for the benefit of our shareholders, customers, licensees and employees."
I always worry when these kinds of announcements are made that it really is more about shareholders than anyone else ... but I'll take Duncan at his word that it'll be good for everyone.
Here's the barometer I would use. Does a spinoff and IPO put Save-A-Lot in a better position to compete at a time when there is likely going to be an enormous price war with Amazon, Walmart and maybe Jet as combatants, and when Aldi is planning a major expansion and Lidl is planning a US invasion? If so, then do it. But if not, don't.
One other thing. Would a spinoff affect Supervalu's ability to drive down costs and prices so that it can make its wholesale customers more competitive? I cannot imagine that it would, since Save-A-Lot would remain a Supervalu customer ... but perhaps someone can enlighten me if I'm wrong on this. (Which I easily could be.)
Fortune reports that at a NASA convention yesterday, Amazon unveiled a proposal to the Federal Aviation Administration (FAA) that would reserve part of the sky for its delivery drones - and, presumably, delivery drones used by other companies.
According to the story, "As part of its plan, Amazon suggests a 200-foot space of air — between 200 and 400 feet from the ground — be reserved for state-of-the-art drones flying at speeds of 60 knots or more. To keep things safe, it also proposes that a 100-foot cushion just above that airspace be made a no-fly zone to act as a buffer between drones and other aircraft, such as planes."
The Fortune story goes on:
"In Amazon’s world, the drones it and others use will be highly sophisticated, safe, and autonomous. The company has outlined five capabilities drones in the special zones must have. They include: sophisticated GPS that tracks the location of other drones in real-time; a reliable Internet connection; online flight planning to communicate the drone’s path; communications equipment; and sensor-based sense-and-avoid equipment to fly around other drones and obstacles.
"Amazon’s proposal would also set some limits on drone hobbyists. Their aircraft would be confined to small pockets outside of these new flight areas unless they meet the criteria to fly among Amazon’s drones. Currently, they are permitted to fly up to the 400-foot mark."
The story also notes that none of this is expected to happen soon, since Amazon is still "butting heads" with the FAA over the use of commercial drones to delivery commercial goods.
I just have to admire the cojones of the Amazon folks when they come up with plans like these ... they are at once sensible and arrogant, but also amazingly forward-thinking when it comes to process and infrastructure.
It seems to me that the FAA has already begun backing off some of its objections to commercial use of drones ... no reason to think that this won't continue.
Get ready to duck.
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The Santa Barbara Independent reports that as part of Haggen's moves to cut staff and store hours as a way of cutting costs at the dozens of stores that it recently acquired in California, Arizona and Nevada, it has laid off 14 developmentally disabled workers at five of its California stores.
Haggen - which added 146 stores to its 18-unit fleet when it acquired supermarkets that had to be divested because of the Albertsons acquisition of Safeway - has been making cuts to compensate for the fact that sales are considerably below projections and its stores have been unable to get much traction in the new markets.
The story says that "according to a written statement from PathPoint, an advocacy group for ADA members, every Haggen store in the Santa Barbara area has terminated long-term developmentally disabled employees: one in Carpinteria, two in Five Points, four on the Mesa, one at Turnpike, and six at the Fairview location. In the first round of layoffs, employees received notices of termination during the week of July 17 and were let go 4-5 days later. In the second round of layoffs, employees received notices on July 21 and were let go on July 24.
"PathPoint stated that Haggen has laid off 'all' of the 'courtesy clerks with developmental disabilities that PathPoint had placed with the original corporations.' Those who have been let go will lose seniority and will be forced to rebuild workplace relationships from the bottom up, according to PathPoint. Furthermore, the organization said, there has been talk of an agreement between Albertsons, Vons, and Haggen that prohibits laid-off employees from seeking work at any of the affected stores for one year."
The story also notes that there have been reports that Haggen laid off 17 developmentally disabled employees in its Paso Robles, California, store.
Haggen Pacific Southwest CEO Bill Shaner, the story says, "declined to comment on any of the layoffs, but said they were made 'to ensure we’re operating as efficiently as possible'."
I wonder if the top folks at Haggen get up each morning and scan the sky to see if they can spot a flying pig ... because it seems like it'll only be when pigs fly that the company is likely to get a positive headline.
Let's put aside for a moment all the obvious reasons why this is a headline that nobody would like to see written about their company. Let me just suggest that it reflects a larger problem that Haggen has to deal with.
The programs that place developmentally disabled workers in stores tend to be community-driven programs ... and by eliminating all these workers, Haggen is leaving a bad taste in the mouths of customers and communities that it wants and needs to serve. (Beyond the fact that the company's stores are not exactly bowling anyone over.)
The Wall Street Journal reports that Walmart is telling all of its suppliers to pay attention to their labels and make sure that they reflect what actually is inside the packaging.
According to the story, Walmart "sent out a memo to hundreds suppliers from Kraft Heinz Co. to Nestlé SA warning them to comply with labeling laws, emphasizing that the amount inside a package matches what is printed on the outside. The memo ... is a direct response to some retailers, like Whole Foods Market Inc., being accused of overcharging customers by overstating how much of a product they are selling, a person familiar with the matter said. It also comes as corporations and district attorneys are closely monitoring that suppliers are obeying all labeling and packaging rules, and are quick to file suit if they’re not."
Walmart itself got into trouble recently when products it was selling on its website as Made in the USA were found to have been made in China.
Walmart is right to make a big deal out of this, since it always is the retailer that gets blamed for mislabeling, even if it is someone else's fault. But I also think that Walmart has some internal reviews to do ... because the intense focus on price and efficiency is almost certainly going to lead to some people - both inside and outside the company - taking shortcuts, and that's what causes problems.
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Reuters reports that the Conference Board announced yesterday that its index of consumer attitudes fell to 90.9 this month from a downwardly revised 99.8 in June. It fell far short of a forecast reading of 100, and "was the lowest since September 2014, and the decline was the steepest since August 2011."
However, some analysts believed the decline was an anomaly, influenced perhaps more by headlines about problems in Greece and China, as well as stock market volatility, than by a what most people agree is an improving economy in the US.
Wait until the federal Reserve decides to raise interest rates, even a tiny bit ... that'll get people's attention, especially as it affects housing and mortgage numbers. People may have just a bit less discretionary income than in the past, which could be sobering on a number of fronts.
From MNB, May 29, 2015:
USA Today reports this morning that "companies are scrambling to hold on to workers amid a tightening labor market and higher turnover, doling out bigger raises, expanding benefits and providing more training and other perks ... The U.S. unemployment rate last month fell from 5.5% to a near normal 5.4%, helping shift the labor market's balance of power to employees. In March, 2.8 million workers quit their jobs, largely to take other positions, the most since April 2008.
"Companies are responding. Wages, salaries and benefits jumped 2.6% in the first quarter, the most since 2008, according to Labor's Employment Cost Index."
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• Forbes reports that Amazon is getting ready to launch its Amazon Fresh grocery delivery service in the UK. An e-commerce specialist tells Forbes that since e-grocery already accounts for more than five percent of supermarket sales in the UK - as opposed to about one percent in the US - Amazon Fresh could find a very receptive consumer audience across the pond.
• Internet Retailer reports that Amazon has launched a new service called Amazon Launchpad, which the company says offers "a way for startups to market their products through Amazon.com to Amazon customers ... "Amazon says it is initially focusing its recruitment on startups that work with crowdfunding platforms like Indiegogo, venture capital firms and selected startup accelerators. Amazon says Launchpad can help startups solve sales and distribution issues."
Amazon says it will be the seller-of-record for products working with Launchpad, which will make them eligible for the Amazon Prime shipping program.
Can't you just feel the Amazon ecosystem simultaneously expanding and wrapping its warm, enveloping arms around you all at once?
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• Albertsons announced that it has selected KeHe Distributors to be its "primary distribution partner for natural & organic, specialty and fresh products to its nationwide network of over 2,200 grocery stores in 33 states and the District of Columbia."
KeHe said that a new Northern California distribution facility and planned upgrades to other facilities will allow it to successfully manage the new demands on its system, as well as enhance service levels to other customers, as well.
It was just a week ago that Bloomberg reported that United Natural Foods Inc. (UNFI) had terminated its contract with Albertsons; the end of the deal comes 10 months before it was scheduled to end; the relationship has been worth about five percent of UNFI's total revenue, or more than $400 million a year.
Jumping into the continuing minimum wage discussion, MNB reader Kevin Davis sent me the following email:
Kevin, Your commentary on this issue appears as though you are considering the potential success or failure of minimum wage law increases on a very superficial evaluation of WalMart’s actions. A $1 dollar increase by a company that historically underpays relative to competition ( fair market wages required to get employees to hire on and stay once you’ve trained them), has nothing to do with minimum wage laws. They can’t find employees, and when they do, they have trouble keeping them; so they raise the starting wage commensurate with competitive starting wages at other companies they compete with.
Conversely, arbitrarily raising a minimum wage to $15.50 over a few years ( a 50% increase over prevailing minimum wages) in many large cities across the country in an attempt to “create” an artificial economic improvement without compensating improvements in efficiency or production will simply fuel local or regional inflation in the cost of living for those who can least afford to pay for it. Those minimum wage workers who are forced to live there; because the nearby suburbs cost of housing, transportation, and general living expenses are even higher; will simply pay for their own minimum wage increase or get less hours or maybe even lose jobs as businesses close or leave the city.
It will make an interesting case study, at the expense of jobs and economic growth I’m afraid. Or perhaps our large city politicians have stumbled upon the secret code to economic growth and prosperity, just raise minimum wages. If it works they should share it with Greece and Brazil and every third world county facing bankruptcy.
All reasonable points. And I try to make it a habit not to argue with Kevin Davis, simply because it never is a good thing to argue with people who are a lot smarter than me.
Just to be clear ... it was never my intention to equate Walmart's wage increases with the broader minimum wage movement. Kevin is absolutely right about this - they are two entirely different things. But because I ran a clip from a Crain's New York Business story which did sort of equate the two, it is a fair assumption that I felt the same way. (For the record, I run a lot of stories on MNB that I disagree with.)
I am extremely sympathetic to the position that increased wages could cost jobs and inhibit an economic recovery. I am less so when it comes to the argument - sometimes advanced here by certain readers - that any minimum wage is socialism, and ought to be disposed of.
Where I run into trouble rationalizing all this is when it comes to people who may be working 50 or 60 hours a week at minimum wage jobs because that's all that is available to them, for employers who believe it is their mission to keep labor costs as low as possible, and then cut them some more. Those people may not be in a position to get more training or education so they can get better jobs, because they've got to feed their families and pay the rent ... and even if you work 50 or 60 hours a week, if all you are making is minimum wage, it is hard to get by without some reliance on public services, which has its own impact on the economy, not to mention the culture.
If the two warring factions in this argument could sit down and figure out a nuanced, sophisticated, compassionate and yet economically sound way to address these issues, I'd be all for it. And if it could be done in such a way that state and federal minimum wages laws don't have to be changed, all the better.
But I don't hear the low murmur of intense and reasonable discussion, but rather the clanging bell of a dissonant and dysfunctional political system that isn't addressing the problem.
MNB reader Larry Ishii had some thoughts about yesterday's piece about Millennial dads:
I find this passage particularly interesting.
“…their higher average spending ($170 compared to $108 of all) and increased cost per item. The implication is that Millennial dads are likely seeking out quality over a good deal."
I wonder if the Millennial dad might not feel the same constraints over spending (total spending or spending more for given items) vs. the woman of the household.
Being a baby boomer, such dynamics were very common when the woman/mom shopped, feeling a need to keep spending within the budget – actual or imagined.
For all the differences between the generations that we talk about, I wonder if some of the old “beliefs” still have a hold.
Regarding the Starbucks customer who made a fuss about non-disabled people who parked in disabled-only spots, one MNB user wrote:
Like many people, I once thought that there were always plenty of empty disabled parking spaces everywhere I went. Then I broke my foot and could not walk for 4 months. What I found is that it is very difficult to find a disabled spot most of the time when going anywhere that is desirable, and often the cars in the spots have no sticker or tag.
From another reader:
I read your article about the individual enforcing handicapped parking spaces at Starbucks and your comments about being a rule follower about marked spots. While I agree with you and act similarly with most spaces I have recently drawn the line when traveling in your usual neck of the woods, the Merritt Parkway. The rest stops along the way are wonderful as you can quickly make a restroom stop or grab a coffee without taking as much time as you would on a major road but the downside is that parking is somewhat limited.
Recently I have noticed that several of the spaces are taken up with Tesla charging stations, others are marked for low emissions vehicles and others are for high occupancy vehicles, leaving very few for others. While I believe that the Handicapped ones are sacrosanct, I have begun using the others if necessary.
Hard to imagine that taking a Tesla's designated parking space is the first step down the slippery slope of anarchy ... but you never know.
And from another MNB reader:
Can someone please answer the phone I think its the irony police calling. I am guessing that a majority of the fully abled folks parking in the disabled spots are the same ones who supported politicians and policies that have shuttered countless small business due to frivolous ADA lawsuits.
This same misplaced compassion ensures that a large portion of the lot at my local Lowes is lined up with at least 10 of these spots that are never used. The problem with the Starbucks customers is that they forgot to point out that the rules are not supposed to apply to them - especially when they racing to get their $4 coffee. I say some public shaming might be a good reminder that the world does not revolve around them.
I have a problem with the notion that parking spaces for the disabled is "misplaced compassion." Not where I come from.
And I am amused by the political prism through that this reader uses to view the situation. I presume that when he refers to "a majority of the fully abled folks parking in the disabled spots (who) are the same ones who supported politicians and policies that have shuttered countless small business due to frivolous ADA lawsuits," he is writing about liberals.
And the thing is, I'd be willing to bet that about a third of the people parking in these spaces are, in fact, liberals. Another third probably are conservatives (who like $4 coffee as much as liberals, it has been my experience). And the other third are people like me who are sick to death of people finding every possible reason to throw a political rock.
Maybe it is just that the people who use disabled parking spaces are so wrapped up in their own lives and immediate needs that they can't see beyond the moment ... regardless of their political philosophies.
On the subject of people who leave their children in cars, one MNB user wrote:
This is one I just don’t get. I cannot imagine “forgetting” my child is in the car. Now to be fair neither one of my children was particularly quiet while in the car unless the trip was longer than to daycare or the store AND my daycare was the opposite direction of work so going to daycare was not on the way but sort of a destination. I don’t have a problem with preventing procreation if you can’t take care of the child you already have. I think a reminder beep that you have a passenger is a good idea and well worth the money.
I still think my original "idiot parents" crack was unnecessary.
And MNB reader Andrew Whelan wrote:
Thanks for passing along the Weingarten article (from the Washington Post). I have a toddler and another due any day. Heart-wrenching and difficult to read while very important at the same time. I’m not sure this will move us to purchase the product (a baby car seat that signals that a child is in it when the ignition is turned off), but I know what the topic of conversation with my wife will be tonight.
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National Football League Commissioner Roger Goodell yesterday upheld the four-game suspension of New England Patriots quarterback Tom Brady. It was a suspension that Goodell originally imposed after charges were made that Brady arranged for footballs used in the AFC Championship game to be slightly under-inflated, which conceivably would have given Brady an advantage in throwing them during a game in which the weather was cold and wet.
The New York Times writes that "the league said in a 20-page statement that its decision was based mainly on Brady’s asking an assistant to destroy a cellphone that he had used before, during and after the week of the game. The league said the phone’s destruction, eliminating what league investigators believe were 10,000 texts, came to light in Brady’s testimony to the commissioner at an appeal hearing in June, months after league-appointed investigators requested text messages and emails.
"Brady was not obliged under league rules to provide the materials, but his failure to do so, compounded by the destruction of the phone, raised the question of obstructing the league’s investigation and was the critical factor that led Goodell to uphold the penalty rather than reduce it, as he has frequently done in disciplinary cases."
Expectations are that either Brady or the NFL Players Association will sue to overturn Brady's suspension.
It is a truism in cases like this that it is never the crime that gets you, but the coverup.
I've yet to read anywhere what Brady's rationale for destroying the cellphone might have been, so it is hard to come to any other conclusion other than that he was trying to destroy evidence.
Actually, I can think of other reasons ... like there was something else on the cellphone that might've ruined his image and cost him a lot more than $2 million in salary for missing four games. Two million bucks is a pittance compared to all his endorsement income. But let's be clear ... this is pure speculation from someone who probably has watched too many episodes of "Law & Order."
But here's my guess, as fueled by my overactive imagination: the decision will be made by Brady and the union to let this go ... to express both outrage and disappointment, but to accept the decision in the best interests of the team. And the issue of what was on the cellphone will simply die.
I've gotten numerous requests from folks living in the Portland, Oregon, area for one of those casual MNB get-togethers that we occasionally do when I'm visiting a city. And so, we're planning one for this week...
Let's plan on meeting at 5 pm on Thursday, July 30 at Nel Centro, located at 1408 SW 6th Ave, in Portland. I'll plan on being there for a couple of hours - if the weather holds, on the outside patio - and I hope that any MNB readers who'd like to stop by will do so.
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With a uniquely fast-paced, provocative and entertaining approach, Kevin Coupe identifies the ways in which consumers are changing, the reasons behind these changes (technology, the economy, culture, demographics), how new and unorthodox competitors are altering the marketing landscape, and what companies need to do to find and exploit differential advantages.
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